Georgia Court Sorts Out Uninsured Motorist Coverage Involving Multiple Insurers

Uninsured motorist coverage extends the protection of your own automobile insurance to accidents caused by another party who lacks sufficient insurance to compensate you for any injuries. For example, let’s say a drunk driver hits you. You subsequently sue the driver and win $1,000,000 in damages from the jury. But the driver only has $25,000 in insurance and lacks any other assets to pay the remainder of the judgment. In this situation you could seek compensation under your own policy’s uninsured motorist coverage.

Coker v. American Guarantee and Liability Insurance Company

The above example seems relatively straightforward. But what happens when there are multiple insurers who may be liable for the same accident? A federal appeals court in Atlanta recently addressed such a case.

The plaintiff here was injured in a 2007 truck accident. At the time he was driving a vehicle owned by his employer. The employer held at least five separate automobile insurance policies. Policy A covered up to $5 million in damages. The remaining policies were “vertically structured” in order to cover any excess liability. In other words, Policy B would cover any damages in excess of Policy A’s limits, Policy C would cover any damages in excess of Policy B’s limits, and so forth.

Following the accident, the plaintiff sued the driver responsible for the accident. A Georgia jury awarded the plaintiff a total of $5.5 million in damages. The defendant’s insurance only covered $25,000 in damages, so the plaintiff then turned his employer’s insurers for uninsured motorist coverage.

As noted above, the employer’s Policy A had a $5 million liability limit. This would have covered most of the balance of the plaintiff’s judgment. But the plaintiff instead entered into separate agreements with the companies that issued Policy A and Policy B, settling for less than each policy’s limit. After these settlements, the plaintiff had still not received the full amount of his original $5.5 million judgment, so the plaintiff then moved to collect uninsured motorist coverage under Policies C, D, and E.

These three insurers balked, arguing the plaintiff was legally required to exhaust the first two policies before seeking payment from them. A federal judge in Atlanta ruled against the insurers, holding Georgia’s uninsured motorist coverage law, as in force at the time of the accident in 2007, required the insurers to pay. The insurers appealed.

On June 15 of this year, the U.S. 11th Circuit Court of Appeals reversed the trial judge and entered judgment for the three insurers. While the appeals court agreed with the trial court that the insurers were required to provide uninsured motorist coverage under Georgia law, the insurers could enforce “vertical exhaustion” provisions clearly written into the insurance contracts. “Here,” the court noted, “each of the Defendants’ excess liability policies contain unambiguous language limiting recovery to only those amounts exceeding the policy limits of an underlying insurance policy or policies.”

Since the plaintiff voluntarily chose to settle for less than the upper limits of the first two policies, the 11th Circuit said he could not then turn around and demand the remaining three insurers provide uninsured motorist coverage. While the 11th Circuit acknowledged the Georgia Supreme Court has “never explicitly addressed whether” the state’s uninsured motorist law overrides a vertical exhaustion requirement in an insurance contract, the federal court reasoned that enforcing such a requirement in this case would not “contravene the legislative intent” of the law.

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